Internet banking is one of the varieties of “Home banking”, a technology of remote banking that allows the customer to receive banking services without visiting the bank office. Similar technologies, which use the internet’s TCP-IP protocols, are available on other websites. This technology appeared in the early 80s and has changed significantly since then. There are three main stages in the development of home banking services:
- telephone banking – a banking service based on the use of the capabilities of telephones with tone dialing;
- PC-banking, which allows the client with the help of a personal computer and modem to directly connect to the bank’s servers and perform banking operations (not via the Internet);
- Electronic banking differs from PC-banking in that extensive Internet capabilities are used to organize interaction with the bank. It is the most promising embodiment of home banking technology.
According to statistics, more than 80% of all banking transactions can be done sitting at a computer at home or in the office. All those involved benefit from this type of activity: bank customers, banks, software developers and business owners who present their products and services on the Internet.
Ease of use of the bank
Modern ways of communicating are becoming more convenient. This is the main reason why more and more people are using the Internet. This is evidenced by the high growth rate of the number of consumers of Internet banking services. So, the main reason is convenience. Also, among the factors that are most important for customers is the ability to receive a variety of services and attractive interest rates at low costs. The better the bank meets these two conditions, the more customers it can attract.
Today, the best remote banking systems offer consumers almost the full range of services available to customers in the bank’s office: transactions with their accounts (balances, statements, transfers from account to account), investing (deposits, securities, currency speculation), transfers and payment of invoices for goods and services (one-time and periodic payments) and even the issuance of loans.
Demand for services
The first reason that encourages banks to implement Internet banking – the emergence of demand for these services. And, of course, remote customer service via the Internet to banks is profitable. First, because the bank’s costs associated with operations are reduced to a minimum. The bank’s costs per transaction in the Internet banking system can be reduced to 1 cent, which is 100 times less than the cost of service in a regular branch of the bank.
According to various sources, the cost of one Internet transaction for a bank can range from $0.01 to $0.13. According to the Internet Banking Report, each customer who uses Internet banking services reduces the bank’s costs by $565.3 on average each year.
The cost of creating (purchasing) and launching a banking Internet system can be equated with the cost of opening a single regular branch or bank branch. If we add to this the meager costs of operations, the payback rate of the bank’s Internet branch and its overall efficiency will be several times higher than that of a regular branch.
But all this is possible under at least one condition, which is also the third main reason for banks’ interest in Internet banking – is the ability to attract a large number of customers who are not tied to the geographical location of the bank.
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There is another reason that forces banks to develop Internet services – it is competition. Already today, the availability of an electronic banking system in a bank that serves individuals is a significant competitive advantage. We can assume that in the coming years, the possibility of Internet service will become a mandatory element of the complex of banking services.
Questions and answers
Who benefits from this?
Internet banking also brings profit to companies that sell their goods and services to end users – individuals. It is much easier for Internet users to make purchases or use services with as little effort and time as possible. Accordingly, any company that has presented its products or services on the Internet and the opportunity to purchase them online will have more potential buyers.
Is such a bank the main one?
Internet banking is often seen as an additional bank along with the main one, although the possibility of a full transition to such a bank is not ruled out if it can offer more favorable terms and attractive services with a reputation as a reliable bank. Thus, one of the options for positioning the Internet bank – as an auxiliary office to pay current bills. This option requires minimal investment.